The South Carolina Constitution, in Article X, Section 7(b), requires municipalities to adopt a balanced budget each year, with revenues equaling expenditures.
The key to a good budget process that complies with state law is an organized budget plan, executed by a council and staff working together as a team.
Forecasting the budget
City staff can help with budget forecasting by maintaining records on revenue and expenditures in a format that can be compared across at least three to five years.
Councils can avoid unexpected problems by studying and adjusting prior-year revenues and expenditures to account for unique situations. On the revenue side, this could be one-time dollars budgeted the previous year, like grants, collection of past-due revenues, insurance settlements, and opening or closing of businesses or industries. Health insurance premiums, state retirement contributions, utility rate increases and one-time payments are examples of items to double-check on the expenditure side for increases.
Councils may want to wait as late as possible when finalizing revenue projections. A city with a July 1 fiscal year start date may want to consider a budget work session in May, followed by two readings of the budget ordinance in June.
Adopting the budget
As cities and towns craft their budget ordinances, they must use public meetings, and the SC Freedom of Information Act sets the requirements for giving notice of all public meetings. This includes posting an agenda at the meeting site at least 24 hours in advance and notifying the press and anyone else who has requested notice at that time as well. Cities and towns must also post the agenda on their websites, if one exists.
Under SC Code Section 6-1-80, councils must conduct a public hearing on the budget, giving at least a 15-day public notice in a newspaper of general circulation in the area.
For municipalities using the council form of government, the council should designate the people responsible for preparing the budget. For the other two forms of municipal government, state law designates who is responsible for budget preparation. In the mayor-council form, the mayor is charged with preparing the budget for the council’s consideration. In the council-manager form, the city or town manager prepares the budget.
Under the SC Constitution, municipalities most likely do not have the authority to operate under a continuing budget resolution rather than a properly-adopted budget. If a budget cannot be adopted by the end of a city’s fiscal year, council should at least adopt a provisional budget using the previous year’s revenue and expenses. Later, the council could amend the provisional budget as new information on revenues and expenditures arrives, but would still need to have the two readings and public hearings when doing so.
Adjusting the millage cap
Municipalities seeking to increase a property tax millage rate are constrained by Act 388 of 2006. They may increase millage for general operating purposes in one year by the previous calendar year’s average consumer price index increase and the percentage increase in the municipality’s previous year population as provided by the SC Revenue and Fiscal Affairs Office.
The law allows a “look-back” period of three years. Councils that did not impose the millage increase allowed by Act 388 during the previous three years may impose that increase in addition to their current-year allowance.
In property tax reassessment years, municipalities must adjust the millage rate to account for the change in the assessed value after reassessment, excluding the increase in value associated with new construction, the renovation of existing structures and the resale of a property to produce no more property tax revenue than the previous year. This is referred to as the “rollback millage calculation.”
Learn about the budget process in the Handbook for Municipal Officials.